November 23, 2016
- A recent study has shown that Australians are missing out on as much as $1.7 billion by not refinancing.
- People do not seem to understand the benefits of refinancing.
- Technology improvements have simplified the process.
A recent study has shown that Australians are missing out on as much as $1.7 billion just because they are not refinancing their mortgage. The study was conducted by the Heritage Bank and the University of Technology in Sydney.
Among the people who responded to the survey, it was discovered that as many as 67% did understand that they should try and get the best deal on their mortgage. In spite of knowing the benefits, just one-third of them actually refinanced their home loan.
When calculating the amount of money that those people who did refinance actually saved, it was discovered that they had collectively saved as much as $718 million. This reveals that it was a very good move on their part.
Many of the other two-thirds who did not make the switch felt that it would be too much trouble. Some thought that it would be too difficult, and about half of that group said that they considered it to be too much of a hassle and the benefits too little to be worth the time and effort needed to obtain a new loan.
One reason that appears to be the cause of not refinancing is that people do not seem to understand how much savings they could get with a better loan. Another reason is that some are concerned about how much it would cost to pay the exit fees.
The savings that could be obtained by making the switch could be as much as $3,000 per year on average. Over the life of a 30-year mortgage, this would have meant a possible savings of as much as $90,000. In spite of the potential savings, these people did not feel the need to make the switch.
The fact that so few have made the change is even more surprising when other research has revealed that as many as seven out of ten homeowners in Australia are feeling stressed by their mortgage. Out of the people who are feeling stress about their mortgage payments, only one out of ten of that group have actually refinanced their mortgage.
Even after the rates were lowered in August by the Reserve Bank of Australia (RBA), this did not seem to encourage more people to try to get a better deal on their mortgage. This makes it doubtful if some people will ever decide to refinance for a better deal.
Many of those feeling the stress had to cut back on other expenditures of their home so that they could make the repayments on their mortgage. Even worse is the fact that more than 340,000 Australians had to re-enter the workforce just to cover payments. Some of them had to go from working part-time to full-time just to make their mortgage payments.
Some banks have taken steps to make the process of refinancing easier so that more people would be encouraged to do it. Their staff is also trained so that they can help people move through the process of refinancing their home loans as easily as possible.
Banks are also trying to inform people that they need to put forth some effort in order to find the best deal. By looking around, they are likely to find a better deal than they currently have. Doing some lending research will certainly be worth it, if it helps home owners to get a new mortgage and save money on it.
Australians need to realise, especially those who are experiencing financial stress, that the benefits of refinancing could put them in a better position financially. By reducing their monthly mortgage repayment amount, they can free up more money and use it to reduce other bills. This means that refinancing their mortgage could enable them to take a step closer toward financial freedom.
Talking to a refinancing expert, or their bank, would enable many Aussies to discover how much easier it could be to get that new mortgage. It would also let them be a part of those who take advantage of the opportunity and who have found that it was certainly worth the effort.
Written by Refinancing.com.au
Refinancing.com.au is an end-to-end service that helps people refinance their home loan. We empower you to search for your home loan, and choose the process that suits you.
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